BRASILIA. – The price of the dollar in Brazil continues to rise and marked this Friday a new all-time high by exceeding 6.10 reais, driven by uncertainty around the government’s fiscal commitment Luiz Inácio Lula da Silva. Around 10 o’clock, the dollar was trading with an increase of 1.88%, with a value of 6.1016 reais, but then it began to fall before political messages on the controversial tax reform project.
Later, the dollar stopped its rise and began to fall, to 6,015 reais, after the speeches of the presidents of the Senate and the Chamber of Deputies, Rodrigo Pacheco and Arthur Lira, respectively, who reinforced the importance of the adjustment measures presented on Wednesday by the Minister of Economy, Fernando Haddad, although They pointed out a difficult path for the project that exempts from income tax (profits) those who earn up to 5,000 reais (about 840 dollars), the initiative that caused the devaluation.
“The issue of income tax exemption, although it is everyone’s wish, It is not on the agenda for now and can only happen if (and only if) we have the fiscal conditions for it”Pacheco said. Lira added that this project will only be analyzed next year and said that “fiscal responsibility is non-negotiable.”
At noon, it was the Minister of Economy himself, Fernando Haddad, who was more flexible about the project. “I have spoken a lot with the presidents of the House [de Diputados]Arthur Lira, and from the Senate, Rodrigo Pacheco, and there is alignment with the government. If there were any surprises, they were positive, including correcting distortions in the package. We can open the legislative year with corrective measures. “There is no arrogance on the part of the government and no one tries to sell fantasies,” Haddad said at a luncheon for bank directors, promoted by the Brazilian Federation of Banks (Febraban), in Sao Paulo.
On Thursday, the North American currency had already broken the 6 reais threshold for the first time in history. According to the Central Bank of Brazil, the dollar closed the day at 5.99 reais, while this Friday it opened again with a bullish trendreaching 6.0245 reais at 9.15 before continuing to rise.
The Real fell again today against the dollarArchive
For its part, the stock index Ibovespathe main one in Brazil, began the day on Friday with a slight drop of 0.22%standing at 124,340 points.
According to the statistical series of the state Institute of Applied Economic Research (IPEA), Since the real entered circulation in 1994, the US currency had never reached 6 reais.
The devaluation of the real It occurred as a result of the announcement of a package of fiscal adjustment measures by the Brazilian government, which seeks to contain public spending and reassure the markets. However, it was received with skepticism by financial analysts, who consider it insufficient to address fiscal imbalances.
The measurement package includes adjustments in salary ceilings and benefits for public employees, as well as in military retirements, with the objective of generate savings of 70 billion reais (almost 12 billion dollars) until 2026. He also proposes tax the highest income sectorsincluding taxes on large assets, inheritances and high-value financial transactions, and contemplates a tax reduction for middle-income citizens.
The measures “consolidate the government’s commitment to the country’s fiscal sustainability” for “a stronger, fairer and more balanced Brazil in the future,” Finance Minister Fernando Haddad said on national television on Wednesday.
But in parallel with the cuts, Haddad announced that he will favor middle-income citizens with a tax reduction – in the so-called income tax – as a counterpart to alleviate the social impact of the adjustment, which generated doubts among investors.
## Brazil’s Real Takes a Tumble: What’s Behind the Dollar Surge and what’s Next?
**World Today News Exclusive Interview**
**Wiht Dr. Ana Luisa Silva, Chief Economist at the Brazilian Institute of Economics (IBE)**
**World today News:** The Brazilian Real has been experiencing significant volatility lately, reaching a new record high against the US dollar. Dr.Silva, what are the key factors driving this upward surge?
**Dr. Silva:** The recent surge in the US dollar against the Brazilian Real is primarily driven by growing **uncertainty surrounding the Lula administration’s fiscal commitments**. Investors are concerned about the goverment’s ability to implement responsible fiscal policies, particularly in light of ambitious social programs and the proposed tax reforms.
**World Today News:** The proposed tax reform, particularly the exemption from income tax for individuals earning up to 5,000 reais, has been met with mixed reactions. Some argue it could stimulate the economy, while others fear its impact on government revenue. What’s your take on this?
**Dr. Silva:** While the intent behind the income tax exemption is laudable – aiming to alleviate the tax burden on lower-income earners – its feasibility is debatable.As highlighted by both President Pacheco and President Lira,such a measure would require significant fiscal adjustments. Right now, the government’s focus should be on stabilizing the economy and building a sustainable fiscal framework. Implementing such a drastic tax exemption without ensuring adequate revenue streams could jeopardize these efforts, possibly leading to further Real devaluation and economic instability.
**World Today News:** After an initial surge, the Real showed signs of recovery later in the day. What triggered this turnaround, and what can we expect in the coming days?
**Dr. Silva:** The Real’s temporary rebound was largely due to reassuring statements from the Senate and Chamber of Deputies presidents. Their reaffirmation of the
importance of fiscal discipline and their cautious stance on the income tax exemption helped assuage some investor concerns. Though, the situation remains volatile. the market will be closely watching the government’s next steps. Concrete
actions to demonstrate fiscal responsibility, coupled with a clear roadmap for the proposed tax reform, will be crucial to restoring confidence in the Real and stabilizing the currency.
**World Today News:** What key measures should the Lula administration prioritize to regain investor confidence and stabilize the Real?
**Dr. Silva:** the government needs to take a multi-faceted approach.
**First**, they must present a detailed fiscal plan outlining concrete measures to reduce the budget deficit and ensure long-term fiscal sustainability. **Second**, they need to engage in transparent and inclusive dialog with investors and stakeholders to address concerns and build trust.
**Third**, the government should focus on implementing structural reforms that foster economic growth and increase productivity.
These measures,
While the proposed tax reform ,remains a complex
issue, the government must prioritize a responsible and sustainable
fiscal approach to regain investor confidence and ensure a stable
economic future for Brazil.
**Thank you, Dr. Silva, for your valuable insights.**
